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Miscellaneous Notes

Wednesday, April 23rd, 2014

When I was writing at RealMoney.com, I would often do little posts in the Columnists Conversation, and title them “Notes and Comments,” or something like that.  I don’t normally do that here, but I would like to tie up some loose ends.

1) I received the following e-mail six weeks ago, and I feel it is worthy to be shared with readers:

Hi David,

I follow the Aleph blog from time to time. I run value and special situations oriented hedge fund whose goal is to purchase businesses that sell for at least 50 cents on the dollar. It seems that we are like minded in investment terms. I have an extensive investment checklist which that I believe can add value to investors. It took me a few years and I derived it by reading stacks of annual reports from Buffett, Klarman, etc…

If it adds value to your readers, more than happy to share the 90+item investment checklist.

http://www.brarifunds.com/wp-content/uploads/BIF-Checklist.pdf

Regards,

Pope

Pope Brar, Managing Partner/Founder

Brar Investment Funds

I’ve read through the checklist and it is a good one.  It has all of the elements of my processes (though I am not as rigorous) and much more.  His checklist is worth a read.  Have a look at it.

2) From last night’s post, a reader asked:

Lots of insurers here.  Given your expertise in that area, I’d be curious to know if you think this screen is turning up names that are on the riskier end of the spectrum.

I wrote a seven part series on this, and here are the summary ideas, and the links:

  1. Shrinking the share count
  2. Growing Fully Convertible Book Value per Share
  3. Price Momentum and Mean-Reversion
  4. On Conservative Management & Reserving
  5. Some Things Can’t Be Underwritten
  6. Analyzing Insurance Sub-Industries and the PB-ROE model
  7. Insurance Accounting and Miscellaneous Insurance Insights 

I’ve been decreasing my insurance shareholdings lately because:

  • Pricing is weak for most P&C coverages, and
  • I don’t trust the reserving for secondary guarantees in life and annuity policies.

Here’s the insurance companies from last might’s article in decreasing order of earnings yield:

CompanyTickerIndustryCountryB/PE/PROE
Imperial Holdings, Inc.IFT0709 – Insurance (Life)United States 1.38 37.03 26.83
Greenlight Capital Re, Ltd.GLRE0715 – Insurance (P&C)Cayman Islands 0.90 19.45 21.61
Assured Guaranty Ltd.AGO0715 – Insurance (P&C)Bermuda 1.18 18.59 15.75
American Equity Investment LifAEL0709 – Insurance (Life)United States 0.86 16.77 19.50
Everest Re Group LtdRE0715 – Insurance (P&C)Bermuda 0.88 15.35 17.44
Validus Holdings, Ltd.VR0715 – Insurance (P&C)Bermuda 1.00 13.30 13.30
Axis Capital Holdings LimitedAXS0715 – Insurance (P&C)Bermuda 1.01 13.20 13.07
Endurance Specialty Holdings LENH0715 – Insurance (P&C)Bermuda 1.31 12.55 9.58
CNO Financial Group IncCNO0709 – Insurance (Life)United States 1.29 12.39 9.60
American International Group IAIG0715 – Insurance (P&C)United States 1.34 12.00 8.96
Montpelier Re Holdings Ltd.MRH0715 – Insurance (P&C)Bermuda 0.99 11.83 11.95
Allied World Assurance Co HoldAWH0715 – Insurance (P&C)Switzerland 1.00 11.73 11.73
XL Group plcXL0715 – Insurance (P&C)Ireland 1.12 11.72 10.46
Argo Group International HoldiAGII0715 – Insurance (P&C)Bermuda 1.27 11.55 9.09
Platinum Underwriters HoldingsPTP0715 – Insurance (P&C)Bermuda 1.02 11.25 11.03
Allianz SE (ADR)AZSEY0715 – Insurance (P&C)Germany 0.92 11.08 12.04
ACE LimitedACE0715 – Insurance (P&C)Switzerland 0.84 10.92 13.00
ProAssurance CorporationPRA0715 – Insurance (P&C)United States 0.87 10.86 12.48
MBIA Inc.MBI0715 – Insurance (P&C)United States 1.45 10.86 7.49
National Western Life InsurancNWLI0709 – Insurance (Life)United States 1.63 10.85 6.66
Partnerre LtdPRE0715 – Insurance (P&C)Bermuda 1.23 10.75 8.74
Old Republic International CorORI0715 – Insurance (P&C)United States 0.88 10.53 11.97
Employers Holdings, Inc.EIG0706 – Insurance (A&H)United States 0.93 10.46 11.25
United Fire Group, Inc.UFCS0715 – Insurance (P&C)United States 1.05 10.30 9.81
Maiden Holdings, Ltd.MHLD0715 – Insurance (P&C)Bermuda 0.93 10.11 10.87
EMC Insurance Group Inc.EMCI0715 – Insurance (P&C)United States 1.02 9.88 9.69
Investors Title CompanyITIC0715 – Insurance (P&C)United States 0.86 9.85 11.45
Protective Life Corp.PL0709 – Insurance (Life)United States 0.92 9.76 10.61
Lincoln National CorporationLNC0709 – Insurance (Life)United States 1.07 9.76 9.12
FBL Financial GroupFFG0709 – Insurance (Life)United States 0.96 9.73 10.14
Assurant, Inc.AIZ0709 – Insurance (Life)United States 1.00 9.67 9.67
Kemper CorpKMPR0715 – Insurance (P&C)United States 0.95 9.64 10.15
Aspen Insurance Holdings LimitAHL0715 – Insurance (P&C)Bermuda 1.12 9.61 8.58
Horace Mann Educators CorporatHMN0715 – Insurance (P&C)United States 0.91 9.60 10.55
Unum GroupUNM0709 – Insurance (Life)United States 0.98 9.55 9.74
WellPoint IncWLP0706 – Insurance (A&H)United States 0.89 9.52 10.70
ING Groep NV (ADR)ING0709 – Insurance (Life)Netherlands 1.14 9.46 8.30
Axa SA (ADR)AXAHY0709 – Insurance (Life)France 1.19 9.46 7.95
Hanover Insurance Group, Inc.,THG0715 – Insurance (P&C)United States 0.99 9.44 9.54
Baldwin & Lyons IncBWINB0715 – Insurance (P&C)United States 0.98 9.42 9.61
American Financial Group IncAFG0715 – Insurance (P&C)United States 0.87 9.15 10.52
Alleghany CorporationY0715 – Insurance (P&C)United States 1.01 9.15 9.06
American National Insurance CoANAT0715 – Insurance (P&C)United States 1.40 8.99 6.42
HCC Insurance Holdings, Inc.HCC0715 – Insurance (P&C)United States 0.82 8.92 10.88
Allstate Corporation, TheALL0715 – Insurance (P&C)United States 0.82 8.75 10.67
Symetra Financial CorporationSYA0709 – Insurance (Life)United States 1.23 8.64 7.02
Selective Insurance GroupSIGI0715 – Insurance (P&C)United States 0.90 8.51 9.46
White Mountains Insurance GrouWTM0715 – Insurance (P&C)Bermuda 1.07 8.49 7.93
Fortegra Financial CorpFRF0712 – Insurance (Misc)United States 1.28 8.18 6.39
Cna Financial CorpCNA0715 – Insurance (P&C)United States 1.10 8.15 7.41
Stewart Information Services CSTC0715 – Insurance (P&C)United States 0.83 7.96 9.59
Navigators Group, Inc, TheNAVG0715 – Insurance (P&C)United States 1.09 7.68 7.05
Reinsurance Group of America IRGA0706 – Insurance (A&H)United States 1.08 7.49 6.94
Safety Insurance Group, Inc.SAFT0715 – Insurance (P&C)United States 0.84 7.39 8.80
State Auto Financial CorpSTFC0715 – Insurance (P&C)United States 0.83 6.92 8.34
Genworth Financial IncGNW0709 – Insurance (Life)United States 1.72 6.87 3.99
First American Financial CorpFAF0715 – Insurance (P&C)United States 0.87 6.75 7.76

Now, let me list for you the companies I would avoid on this list: IFT, GLRE, AGO, AEL, CNO, AIG, XL, MBI, LNC, FBL, AHL, ING, AXAHY, AFG, GNW.  That does not mean that I endorse the others.  In general, those that I say to avoid have poor underwriting skills or a bad business model.

3) Another letter from a reader, on a very different topic, the FOMC:

thanks again – I always look forward to this update.

My thoughts are, they are increasing their flexibility in one direction (towards “accommodation”).  While they did move the point about “after the purchase program ends” to a spot perhaps better suited to a discussion of that point, I also took it to mean that there may be less commitment to end QE.  (Although, so long as the deficit keeps declining, they really have no choice but to dial back purchases to keep the supply and the non-Fed demand in line.  This is the overlooked reason, I believe that long rates appear to be moving independently of Fed action.  Their demand is not the only variable).

 Final thought - to what extent do you think that the Fed’s great misunderstanding is their inherent bias towards lowest rates possible under any economic conditions: i.e. for any given level of inflation, that Fed policy is best that reflects the lowest level of non-inflationary interest rates [because this presumably encourages credit expansion and therefore economic growth]?

 To my way of thinking, the difficulty with this is that it assumes that credit always has to expand FASTER than the economy overall.  I don’t mean that credit expansion is not important, it is a big component of growth, just that credit can’t grow faster than income forever and at some point, we have to find a model that enables income to grow fast enough to increase living standards without overleverage.

 To me, this is the central policy challenge of the 21st century, because a) globally, credit has surged relative to national income and has reached a limit, b) populations are aging and must therefore favor lower levels of credit – and consumption – overall and c) the bills associated with 1 and 2 are now coming due.

 The Fed, however, seems stuck on the idea that their job should be to inflate rapid credit expansion regardless of the creditworthiness of the borrowers.  This strikes me as dumb, or perhaps more like wishful thinking that if credit expands, growth will drive incomes higher and somehow these will catch up (with some acceptable lag).

 Notice that no one at the Fed talks about things like the household savings rate any more?  I would be ok with QE if the Fed could explain that they were facilitating an orderly deleveraging: in which case Household Debt/Equity (which indicates potential for end-consumer final demand) would be a better metric than unemployment.

 As it is, I believe that what they are really targeting (large) bank balance sheets, and that QE is really a massive backdoor subsidy to money center banks to guarantee enough operating income to allow them to write off bad loans while increasing capital reserves to comply with Basel III.  (Full disclosure, I have a significant portion of my assets in a large US bank that was trading well below the strike price of the warrants issued against its shares to Berkshire Hathaway at the time I purchased the shares, which bank shall remain nameless).

 Politically, I suppose, saying, “well, we need to ensure banks are profitable so as to ensure the solvency of the payments system” looks disturbingly like a bailout for the 1% and is out of touch with a more populist America.

 Anyway, sorry for the diatribe, but curious to get your thoughts.  I think I am less reflexively sceptical about the efficacy of the Fed’s policy (but I fully agree with your view that they are not supporting employment with it).

 Thanks again for all the work you do.

The central idea I would like to comment on is that incremental easing has had less and less effect on the economy, at least in the short-run.  Aside from energy companies, willingness to invest in the business has been light, while willingness to buy back stock has been high.  That doesn’t produce growth in the economy.

The Fed doesn’t realize that it can’t stimulate the economy at the zero bound.  QE is ineffective, and may become fuel for high inflation if the banks start to lend aggressively.  Inflation is not the goal, and I think many policymakers are confused — the goal is real growth.

We can protect the payments systems by protecting the regulated subsidiaries of banks, and letting the holding companies bear the losses, which is what we failed to do in 2008-2009.

All that said, we have a punk economy, but what will happen if we get a large increase in bank lending, leading to inflation.  What will the Fed do then?

Book Review: The Death of Money

Sunday, April 20th, 2014

103729This is a hard book to review. I have respect for the author, and most of his opinions.  But extraordinary claims require extraordinary proof.  There is evidence here, but not extraordinary proof.  I agree that we are in a bad spot, and that there is reason to be cautious.  To claim that the current international monetary system will disappear by 2020 or so requires more than the book delivers.

Let me begin by saying the book is worth buying.  It will make you think.  Thinking is a valuable exercise in which few engage.  Most of us imitate, which is far easier to do than thinking, and usually saves time on common issues.

The author focuses on the weaknesses of US economic policy, but is less critical of bad economic policies being pursued around the world, with the poster children being Japan, China, and the EU.  The US has its problems, but also its unique strengths.  Though I am a critic of US economic policy, we are better off than most other large nations.

One criticism of the book is that it is not focused.  Make your case, and don’t go down many “rabbit trails.”  That said, the rabbit trails are interesting, and you will learn a lot from them, though they don’t support the central thesis of the book.  I think the book needed a better editor, because a tighter book would have made the case better.

Here’s the main difficulty: Okay, so the US Dollar is not a great store of value.  Imagine another nation who wants a better store of value, who lets their currency rise, and their politically powerful exporters scream.  Who will likely win?  The exporters.  At least, that has been the way it has worked for the last 30 years.

In order for a gold-backed currency to be introduced, there will be sacrifices, and under most conditions, it will produce some deflation.  It is not at all certain that the nation(s) that might do this will take the short-term punishment.  Our world is geared toward short-termism, and it harms us all.

Quibbles

The book is far too kind to the IMF, an incompetent institution, and far too kind to China, which faces a collapse in its financial system far more quickly then the US will see.

The book is also too kind to the EU, which continues the experiment of monetary union without political union, which has never worked  before on a large scale.

Who would benefit from this book: Anyone could benefit from this great book.  If you want to, you can buy it here:The Death of Money: The Coming Collapse of the International Monetary System.

Full disclosure: I asked the PR people for a copy of the  book, and they sent it.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

Sorted Weekly Tweets

Friday, April 18th, 2014

Stocks & Industries

  • Invest In Stubs, Spin-Offs And Liquidations For Alternative Returns http://t.co/ccezep0K9Y Cites a Gabelli article http://t.co/xTrqEfmQeq $$ Apr 19, 2014
  • Real Estate Management Better Than Owning Real Estate? http://t.co/IFaDLiwTRa Sometimes yes, sometimes no. Definitely adds more leverage $$ Apr 19, 2014
  • Wells Fargo Securities Lending Lawsuit Ends in Settlement http://t.co/w3lSY4Cw8D Low margin business that can go badly wrong in a crisis $$ Apr 19, 2014
  • Makani, a $GOOG subsidiary makes an airborne wind turbine that dramaticlly increases power generation efficiency http://t.co/0Fug49o7gC $$ Apr 18, 2014
  • Google to Buy Titan Aerospace as Web Giants Battle for Air Superiority http://t.co/HjJ8wKtnjM Makes me think $GOOG has 2much $$ 2spend Apr 18, 2014
  • Profit Tastes Like Chicken in Hunt for Cheaper US Meat http://t.co/drgQbwEiKR With recent rise in beef & pork prices people substitute $$ Apr 18, 2014
  • Roads Versus Rail:The Big Battle Over Public Transportation http://t.co/ydBxEglexC Makes case that American will own fewer cars in future $$ Apr 18, 2014
  • Barclays Ups $LNC To Buy, Says $MET , $PRU Are Undervalued – Stocks To Watch http://t.co/c7yNaVZqdp Stock Market sensitive insurance cos $$ Apr 18, 2014
  • Bidding War Looming for Aspen? Analysts Say Don’t Count On It http://t.co/iMotqyAgHv Offer 4 $AHL looks pretty full 2me, dont look4more $$ Apr 18, 2014
  • Biggest LBO Demise Poised to Put Oncor in Play http://t.co/d30djwOa5M Buffett is unlikely 2 enter into bidding in a competitive sale $$ Apr 18, 2014
  • Target of Naked Short Sellers Is Angry, Confused http://t.co/I3ZZDn5JNp @matt_lavine takes on imaginary naked shorting in $LPHI $$ Apr 18, 2014
  • Radioactive Waste Is North Dakota’s New Shale Problem http://t.co/BiMkO0ZdgK Significant amounts of low level radiation from radium $$ Apr 18, 2014
  • The death of mortgage lending http://t.co/u8uQBvZCuS Loan yields must rise in order to compensate for higher required capital at banks $$ Apr 19, 2014
  • Kochs’ Flood Insurance Opposition Becomes Campaign Issue http://t.co/b1iuvoVhZK 1 of the few businesses the Kochs’ aren’t in is insurance $$ Apr 18, 2014
  • Office Markets Strengthen Where Tech, Energy Jobs Are http://t.co/sESuHUeAVr Helps explain the spottiness of commercial RE prices $$ $CMBS Apr 18, 2014
  • Labor Shortage Threatens to Bust the Shale Boom http://t.co/R1TctaTelD Can’t find a job? Consider learning to weld; monotonous but pays $$ Apr 18, 2014
  • Koch Brothers Net Worth Tops $100B as TV Warfare Escalates http://t.co/XgH0M6CNIR Almost as wealthy as extended Walton family $$ $WMT $SPY Apr 18, 2014
  • Big Banks Ramp Up Business Lending http://t.co/83dMAPIQia Signs of life spotted in big corporations, but r they just buying back stock? $$ Apr 18, 2014
  • How Can Yahoo Be Worth Less Than Zero? http://t.co/sr3owwkyNE @matt_levine argues a breakup of $YHOO makes sense even if core biz loses $$ Apr 18, 2014
  • Wal-Mart Undercuts Rivals With New U.S. Money Transfer Service http://t.co/a4vq0HYALi Useful if u need 2 transfer $$ inside the US $WMT $SPY Apr 18, 2014
  • How Chick-fil-A Spent $50M to Change Its Grilled Chicken http://t.co/Q9kpXoSIbF The marinade matters, but the grill design was the key $$ Apr 15, 2014
  • Small US Colleges Battle Death Spiral as Enrollment Drops http://t.co/nHRhO4Gc1R Too much capacity & affordability is a problem $$ $APOL Apr 14, 2014

Outside the US

  • China GDP Gauge Seen Showing Deeper Slowdown http://t.co/ntIxxdXcpO If China increases consumption GDP growth will fall faster still $$ $FXI Apr 18, 2014
  • Housing Trouble Grows in China http://t.co/Z4tKUuqLFd Overbuilding by Real-Estate Developers Leaves Smaller Cities W/Glut of Apartments $$ Apr 18, 2014
  • Suddenly, Europe Is Taking a Harder Line on Russia Sanctions http://t.co/MnzxvMP3pe Nations can solidify when they face a common threat $$ Apr 18, 2014
  • Las Bambas Copper Mine Purchase Shows China’s Still in the Hunt for Commodities http://t.co/h1cqGERGCu China may not b changing much $$ Apr 18, 2014
  • Forgetting How to Speak Russian http://t.co/D0UwT6unki Among former Soviet republics knowing Russian is less important for business $$ Apr 18, 2014
  • The Middle East War on Christians http://t.co/BW1NwCAXuH Israeli Ambassador 2 UN argues Israel is tolerant of Christians, not like some $$ Apr 18, 2014
  • Britons Struggle to Save for Home Down Payments as Prices Surge http://t.co/M6vH0vDlDs Space is constrained in London & foreigners buy $$ Apr 18, 2014
  • US Said to Warn Money Managers of More Russia Sanctions http://t.co/rB8AUQTsnc Putin knows Iran survived worse sanctions; Russia tougher $$ Apr 18, 2014
  • China Sentences Four Activists on Disturbing Public Order Charge http://t.co/Tx95rrhWsb Mostly, US has rule of law, China has rule by law $$ Apr 18, 2014
  • US govt isn’t perfect, but in principle the govt is subject to the Constitution & laws, & not merely able 2 use law 2 enforce its will $$ Apr 18, 2014
  • Frontier Fund Buyers Find It Pays To Look Under The Hood http://t.co/JQ6khwYllJ 2much $$ is being thrown @ frontier mkts; crowded trade $FM Apr 18, 2014
  • Why iShares’ ‘FM’ Is About To Get Better http://t.co/4FiqlfW0YS Diversifies out of Middle East, but frontier market vals r stretched $$ $FM Apr 18, 2014
  • Putin’s 21-Year Quest to Be Russian Guardian Began in Estonia http://t.co/5oelLBHCmN Father was betrayed by Estonians in WWI, almost died $$ Apr 15, 2014

Market Dynamics & Fundamentals

  • Bridgewater Founder Says 85 Percent Of Pensions will Go Bankrupt http://t.co/YknEmyGgfJ 9% pension returns required, 4% is most likely $$ Apr 19, 2014
  • The Fitch Fundamentals Index Dashboard http://t.co/OzI6KWUFfs Interesting little utility 4 understanding where we are in the credit cycle $$ Apr 19, 2014
  • Rich Start-Ups Go Back for Another Helping http://t.co/ZbFbpLVgmM When capital is plentiful, bad decisions get made. expected returns low $$ Apr 18, 2014
  • Stumbling S&P 500 Reaches Worst Stretch of Election Cycle http://t.co/zgJTynu2od Interesting timing, wonder whether past is prologue? $$ Apr 18, 2014
  • How a 56-Year-Old Engineer’s $45K Loss Spurred SEC Probe http://t.co/3HfdH2aqxK Always read the risk factors in the prospectus or 10K $$ Apr 18, 2014
  • High-Speed Traders Said to Be Subpoenaed in NY Probe http://t.co/2qxmrxeVd7 What level of technology is legitimate 2 gain an advantage? $$ Apr 18, 2014
  • Nuggets of Corporate Governance Wisdom From Charlie Munger http://t.co/gMFIE9jlRM Also c this paper: http://t.co/033v0bgdYr $$ $BRK.B $SPY Apr 18, 2014
  • Global stock rally: World market cap reached record high in March, &is $2.4T above pre-recession, pre-crisis level http://t.co/iMq0IoBhch $$ Apr 18, 2014
  • Speed—the only HFT advantage? Not so fast—Flash Boyshttp://www.cnbc.com/id/101586488 Algorithms may also be an advantage w/price patterns $$ Apr 18, 2014
  • Investor Alert – Exchange-Traded Notes—Avoid Unpleasant Surprises http://t.co/NqhUr2whsJ A helpful reminder 2b wary of exotic ETNs $$ $SPY Apr 18, 2014
  • Americans Sold on Real Estate as Best Long-Term Investment http://t.co/La4UROU0ie Helps explain y retail investors lose on average $$ $GLD Apr 18, 2014
  • Destroying Smart Beta 2: Ground Rules http://t.co/uecYqZLCEe Smart beta is a trendy but vapid concept, factors should be part of alpha $$ Apr 18, 2014
  • Gross Loses to Goldman in Hot Bond Strategy as Pimco Lags http://t.co/VWv7UC72bS Series of bad bets makes Pimco a laggard as AUM flees $$ Apr 15, 2014
  • Trillion-Dollar Firms Dominating Bonds Prompting Probes http://t.co/RXZNkNwtFs Concentrated markets can lead to bond pricing distortions $$ Apr 15, 2014

US Politics & Policy

  • What’s the Matter With Illinois? http://t.co/wmDiyWDN1e They r the exemplary state for shortsightedness & corruption $$ Apr 19, 2014
  • Heartbleed Hackers Steal Encryption Keys in Threat Test http://t.co/dYfezfXe8A >6 people were able to extract private key of a website $$ Apr 19, 2014
  • Elijah Cummings, W/IRS, Targeted Tea Party Group True The Vote http://t.co/TE5A1zTM0y I live in his gerrymandered district; kick him out $$ Apr 18, 2014
  • Yellen Lays Groundwork for Rules on Short-Term Credit Markets http://t.co/z03MWlpsqI Fed doesn’t regulate the banks well, y try 4 more? $$ Apr 18, 2014
  • Schooling on a ‘Debit Card’ http://t.co/wwixbB0pqy Arizona created a program so that special needs kids can get specialized schooling $$ Apr 18, 2014
  • IRS Among Agencies Using License Plate-Tracking Vendor http://t.co/HTs5aEMNtK Howard County Police use it & catch people 4 old crimes $$ Apr 18, 2014
  • Wealth Effect Failing to Move Wealthy to Spend http://t.co/R3vfD5i94J Wealth effect, if it exists, is small, FOMC is pursuing illusions $$ Apr 18, 2014
  • NSA Said 2 Exploit Heartbleed Bug for Intelligence for Years http://t.co/9XvcLX9ZTE NSA quietly knows security vulnerabilities; uses them $$ Apr 15, 2014
  • The Wall Street second-chances rule: scandal makes the rich grow stronger http://t.co/8HhscWJjMN What does not kill us makes us stronger? $$ Apr 14, 2014

Practical

  • How well do you know your insurance policy? http://t.co/szp3G8H4kN Know what is covered & what isn’t, how much is covered & options $$ Apr 19, 2014
  • Attention Shoppers: Fruit and Vegetable Prices Are Rising http://t.co/MMdPOLry9A As are meat prices & most food prices $$ #agflation Apr 18, 2014
  • How to start investing http://t.co/yGyziE8Tac Good advice from a credible source $$ Apr 18, 2014

Other

  • El Nino Signs Detected, Presaging Global Weather Change http://t.co/D1uDLS9aJ0 El Nino exists 2 give us something 2 blame when frustrated $$ Apr 18, 2014
  • More People Pick Elimination Diets to Discover Food Sensitivities http://t.co/ftQkzs3PxP Fad and Science of Not Eating Entire Food Groups $$ Apr 18, 2014
  • SAT Adopts Real-World Questions and Jettisons Obscure Words http://t.co/Mspw9EG3OV In 2016, changes from intelligence to achievement test $$ Apr 18, 2014
  • Scientists Make First Embryo Clones From Adults http://t.co/e5qlwyiWwj Cloned cells 2create early-stage embryos, matching DNA tissue $$ Apr 18, 2014

Comments, Replies & Retweets

  • RT @howardlindzon: Funds still paying up (I say silly overpay) for private over public, this is spooking IPO ‘s for sure http://t.co/mclSd9… Apr 15, 2014

Sorted Weekly Tweets

Saturday, April 12th, 2014

US Policy & Politics 

  • Nearly Half of Dodd-Frank Rules Still Unwritten http://t.co/TwzSawT298 Experiment of regulation by study committees continues albeit slow $$ Apr 12, 2014
  • Banks Given Two Extra Years to Fully Comply With Volcker Rule http://t.co/XVfO9CKMm7 Banks prefer abolition; Fed offers a delay $$ #more? Apr 12, 2014
  • How Big Banks Created a Fed to Serve Their Own Interests http://t.co/tUlNYE3px5 Fed almost always ends up being a shill 4 the banks $$ $XLF Apr 12, 2014
  • Angry students snap photos of lunches, tell Michelle Obama: ‘You call this a [expletive] lunch?’ http://t.co/PY4gfa90oI Food Nazis r mean $$ Apr 12, 2014
  • On equal pay for women, Obama challenges GOP to ‘join us in this the 21st century’ http://t.co/wthQJKwsOO White House has own disparities $$ Apr 12, 2014
  • When the Messenger Is Worth Shooting http://t.co/GGuAxpkizc Fewer & fewer people think teaching financial literacy 2 avg ppl works $$ $SPY Apr 12, 2014
  • Republicans should be friendly to markets, not to business http://t.co/YXEWNr9MEh Big business excellent at co-opt laws 4 their own good $$ Apr 12, 2014
  • Maybe a Gender Pay Gap Is OK http://t.co/2rtYIZ6MFo This argumentation isn’t new; economists have been making this argument since the 70s $$ Apr 12, 2014
  • The Best SEC Money Can Buy http://t.co/wbwBB0CYd4 @ritholtz on Jim Kidney’s excellent retirement speech on the SEC which is worth reading $$ Apr 12, 2014
  • Food Price Shock, 2014 Edition http://t.co/u79xlrwK1I Note that the last time this happened, wars & other pains hit developing world $$ Apr 12, 2014

Market Impact

  • Hedge Fund Industry Growing With Pensions To Thank http://t.co/RF2FTh3YsD Probably a mistake as hedge funds tend not 2b good w/volatility $$ Apr 12, 2014
  • Hedge Funds Unwind As Growth To Value Rotation Intensifies http://t.co/XoK1RFKiAg As growth stocks correct, hedge funds chase performance $$ Apr 12, 2014
  • How Money Managers Fight Their Emotions and Sometimes Lose http://t.co/J0KH06m12P Too Bold? Not bold enough? Tough 2strike right balance $$ Apr 12, 2014
  • The Buys You Can’t Make Yourself http://t.co/0swRNG0Eyo @reformedbroker points out the value of @MebFaber ‘s global value ETF $GVAL $$ Apr 12, 2014
  • Humble Student of the Markets: A quant lesson from a technician http://t.co/svQilIRW4m Useful way to understand indicators & mkt regimes $$ Apr 12, 2014
  • 2014 crash will be worse than 1987′s: Marc Faber http://t.co/Guil41sSvP Bold w/respect to timing &severity of the next crisis, prob wrong $$ Apr 12, 2014
  • Do ‘rising rate’ ETFs really protect investors? http://t.co/tcx2p4qtuc I would b wary here; additional yield often carries hidden risks $$ Apr 12, 2014

Rest of the World

  • Kuroda Seen Brewing Yen-Weakening Surprise Action http://t.co/fVpFvwEiJz Don’t b shocked if the BOJ does yet more to weaken the yen $FXY $$ Apr 12, 2014
  • This is the bank to watch for a Chinese credit implosion http://t.co/sKL9NPruZz Minsheng is an aggressive lender 2the most dodgy credits $$ Apr 12, 2014
  • China’s steelmakers have branched out into shadow banking—which is funny since they owe $484B http://t.co/Z1IzHBJJ7G Brief stmt of prob $$ Apr 12, 2014
  • China Pizza Passion Has Fonterra Riding Mozzarella Wave http://t.co/J4605GnGK4 Pizza is so different than traditional Chinese food $$ $YUM Apr 12, 2014
  • Ukraine’s Rust Belt Faces Ruin as Putin Threatens Imports http://t.co/7BYk6ULy3t Russia has more ec influence on Ukraine thn US on Russia $$ Apr 12, 2014
  • Saudi Banks Reject Algosaibi Meeting on $5.9B Default http://t.co/6eZwowBlZW Islamic finance struggles w/debt that isn’t debt but is debt $$ Apr 12, 2014
  • Lavender-Filled Teddy Bears From Tasmania Are a Big Hit in China http://t.co/ubhWoUSnQz Bobbie Bear touches the hearts of Chinese ladies $$ Apr 12, 2014
  • Top economists warn Germany that EMU crisis as dangerous as ever http://t.co/gsqrbZ5ox0 Overall & banking leverage still higher than safe $$ Apr 12, 2014
  • Fracking’s hottest year in China http://t.co/5xVoKK6K0d China finds gas & tight oil in their shale formations. Who knew? $$ $FXI $XLE Apr 12, 2014

Companies & Industries

  • Time Inc. to Raise $1.4B in Debt for Spinoff http://t.co/8QUGvyKhrv I would b careful here; levering up old media not a recipe 4 success $$ Apr 12, 2014
  • Vox Takes Melding of Journalism and Technology to a New Level http://t.co/YdMuuu0ZQC Vox Media creates a content mgmt system 4 journalism $$ Apr 12, 2014
  • Trailer Parks Lure Wall Street Investors Looking for Double-Wide Returns http://t.co/zym4OmSDP5 Poor people have a hard time moving $$ Apr 12, 2014

Other

  • Stay-at-Home Moms Rise in Reversal of Modern Family Trend http://t.co/sCBErpTIhk Children deserve attention to help them grow up $$ $SPY Apr 12, 2014
  • More Moms Staying Home, Reversing Decadeslong Decline http://t.co/w7bnhw8tQd Value in efforts 2 produce better children w/more parenting $$ Apr 12, 2014
  • Font War: Inside the Design World’s $20M Divorce http://t.co/4YpYf1x5UN Not clearly spelling out a partnership agreement: font of trouble $$ Apr 12, 2014
  • Windows XP Goes Dark; Will Hackers Be Lurking? http://t.co/GPBJKpzdhf XP has been debugged; odds of significant holes are low $$ Apr 12, 2014
  • After Heartbleed Bug, A Race to Plug Internet Hole http://t.co/HCBfcHBl5O A significant part of internet affecting privacy had a hole $$ Apr 12, 2014
  • Global solar dominance in sight as science trumps fossil fuels http://t.co/BZOdAVwYbA Can capture 31% of sun’s energy with a 111V Solar Cell Apr 12, 2014
  • At Gross’s Pimco, El-Erian Says ‘Different Styles’ Stopped Working Well Together http://t.co/vRqPfRA67m Oil & water eventually separated $$ Apr 12, 2014

Wrong

  • Unsafe: Greece Plans to Issue Long-Term Bond on Wednesday http://t.co/X4gnld481q Lust 4 yield guides the behavior of debt investors $$ Apr 12, 2014
  • Misleading: Oklahoma Swamped by Surge in Earthquakes Near Fracking http://t.co/nHfPIWys3q All quakes r little which avoids big quakes $$ Apr 12, 2014
  • Wrong: Are Safer Cars Worth the Money? http://t.co/1N0Y9aklJb Misapplies benefit-cost analysis; may b cheaper ways 2 save more lives $$ $F Apr 12, 2014

Retweets, Replies & Comments

  • ‘ @foxjust Nice going; EEBS is breaktakingly honest with respect to earnings manipulation. cc: @jciesielski $$ Apr 12, 2014
  • RT @ReformedBroker: Reminder: The Fed’s own economic forecasts are basically worse than your dog’s. http://t.co/uLYirMA5zB Apr 09, 2014

Sorted Weekly Tweets

Friday, April 4th, 2014

Rest of the World

  • Putin’s Rejection of the West, in Writing http://t.co/X0SOPFH80d ”Russia must be viewed as a unique and original civilization…” $$ $MACRO Apr 05, 2014
  • Japan Working Women Face Tax Blow as Their Numbers Swell http://t.co/D38taPNgWT Govt’s like women working o/s home: can tax their output $$ Apr 05, 2014
  • China Leverage Seen Rising Through 2016 http://t.co/8hJzmlSBp5 It’s relatively worse than advertised, debts r private, bank & muni $$ Apr 03, 2014
  • China Unsated by US Ham Means More Food Deals http://t.co/Cn7hFTEGwP If China is rebalancing to consumption, expect large food imports $$ Apr 03, 2014
  • Rajan Offers No Solace as Developers Fight Rut http://t.co/Ml8RhIt7Eb Rising rates put pressure on Indian businessmen $$ Apr 03, 2014
  • CHINA IS IMPORTING GOLD SECRETLY USING MILITARY CHANNELS http://t.co/gYAjRrwz1c @JamesGRickards new book is coming out in a few days $$ $GLD Apr 01, 2014
  • How rumour sparked panic and three-day bank run in Chinese city http://t.co/i3K74leRHG All it took was a rumor that went viral $$ $FXI $SPY Apr 01, 2014
  • Foreign Policy Legacy of Obama Administration in European Hands http://t.co/LTF2ozdpyA U don’t want Europeans 2question the value of NATO $$ Apr 01, 2014
  • Chinese Private Sector Debt http://t.co/4LMSyjvEV9 China’s ratio of private debt to GDP is higher than the US & EU http://t.co/lXhCxlzumX $$ Apr 01, 2014
  • Poor Coordination Led to Flawed Search for Missing Malaysia Airlines Flight 370 http://t.co/RugoIUSm1y Maybe, but would have been hard $$ Apr 01, 2014
  • South Sudan Ethnic Hatred Drives Rebel Leader’s White Army http://t.co/diy5Tk9W8M Read the last sentence & u will c y this war persists $$ Apr 01, 2014
  • She’s lost 3 sons in the war & is adamant should continue. “The war will not be stopped until we kill all Dinka, including the children,” $$ Apr 01, 2014
  • China Burns Speculators as $5.5B Lost on Yuan Bets http://t.co/srRCSJ9kmU Real market goes more than 1 way, doles out punishment 2losers $$ Apr 01, 2014
  • Almost 10,000 Divorces Each Day in China’s Breakup Boom http://t.co/0T7pTpeg4e Driven by increasing economics & greater freedom 2 do so $$ Apr 01, 2014
  • Dashed Ikea Dreams Show Decades Lost to Bribery in Ukraine http://t.co/9fU4nPMnSj Corruption & denial of propty rights keep nations poor $$ Apr 01, 2014
  • China’s $14.5B Test http://t.co/W9lO6L2LDc China seizes $14.5B assets from family, associates of ex-security chief http://t.co/6STqFY74DB $$ Apr 01, 2014
  • China Lake Saved From Stink Leaves Fiscal Cleanup for Li http://t.co/lAOloKNSxo Ability 2 service municipal debt is a problem 4 China $$ Apr 01, 2014

US Politics & Policy

  • A Catastrophe Like No Other http://t.co/zKuULERWYm Peggy Noonan: The president tries to put a good face on ObamaCare $$ #unforcederror $TLT Apr 05, 2014
  • Janet Yellen’s Human Message Gets Clouded http://t.co/8oYHkdPN4W Truth is monetary policy is weak w/respect to unemployment $$ Change regs Apr 03, 2014
  • Yelp Reviews Brew Fight Over Free Speech, Fairness http://t.co/2SoSO8K54f Free speech doesn’t mean u can say anything, libel is a crime $$ Apr 03, 2014
  • Democrats Bet on Technology Instead of Paying Down Debts http://t.co/UjTKK9VFjC Dems put lack of $$ where mouth is, b/c debts don’t matter Apr 01, 2014
  • Constitutional conundrum: Michigan demand 4a balanced budget could trigger amendment convention http://t.co/UU2pVgEnuu States take power? $$ Apr 01, 2014
  • The House Republican Mess http://t.co/COfoZ0303M GOP leadership held unannounced voice vote on a one-year unfunded “doc fix” 4 Medicare $$ Apr 01, 2014
  • What Is a Patent Troll? Congress, Courts Try to Find Out http://t.co/BDDs3DOccp Should not be able to patent ideas, many ways 2 implement $$ Apr 01, 2014
  • Controversial FHA payoff rule to end http://t.co/gopPWWpQYL At closings, FHA required one month’s interest from sellers who prepaid mtge $$ Apr 01, 2014
  • Supreme Court skeptical of computer-based patents http://t.co/nHLTpDyP8J Multiple ways 2 achieve same results w/computer code $$ $MSFT $GOOG Apr 01, 2014
  • Yellen Assures Markets on Interest Rates http://t.co/OeOTmQHZuj In the short-run, monetary looseness helps, in the long-run it hurts $$ $TLT Apr 01, 2014
  • GOP Sees a New Path for Senate Through Iowa http://t.co/wsb8jJKpWd Looking at the data, the GOP will have a hard time taking the Senate $$ Apr 01, 2014            

Market Impact

  • Buying Bonds in Sellers’ World: Prepare to Fail http://t.co/y7DBRjX57P If u r a life insurer, don’t want 2 give up income from prem bonds $$ Apr 05, 2014
  • Emerging markets ETFs take off in March and June http://t.co/Dd5IMvcU8B Bear market rallies r short & sharp, watch monetary tightening $$ Apr 03, 2014
  • Investors Clamor for Risky Debt Offerings http://t.co/pYAj8nxQve High yield isn’t so high anymore, & income starvation leads ppl astray $$ Apr 03, 2014
  • Gross Worst as Volatility Spikes in Fund http://t.co/V1ncKkJNHW Bad idea to move to 5s just as Yellen began to speak unguardedly $$ #taper Apr 03, 2014
  • Forget the lottery. Time for the Billionaire ETF? http://t.co/K2IZvH5CuA Kind of a follow the 13Fs of the wealthy fund, could do worse $$ Apr 03, 2014
  • Vanguard Beats BlackRock Winning Most ETF Money This Year http://t.co/V1IppyRKyv Low fees, sticky clients, tracks index well, low fees $$ Apr 01, 2014
  • Andreesen On How To Kill Stock Market http://t.co/sbgdxaumyy Personal pet peeve is how Sarbox killed off sponsored listings of fgn firms $$ Apr 01, 2014
  • Activists Beat S&P 500 in 48% Gain for Shareholders http://t.co/TwRuCI4lp3 Cool interactive graphic $$ $SPY Apr 01, 2014
  • Investors Picking Fights Enhance Value as Stocks Beat S&P 500 http://t.co/c7N0cM7ytB Problem: avg investors can’t find those stocks early $$ Apr 01, 2014
  • Biggest ETF Flow From US Debt Since ’10 on Growth Optimism http://t.co/YEy2MGXYKI Funny how long Tsys haven’t tanked yet $$ $TLT Apr 01, 2014
  • So Far, So Meh http://t.co/0dCzzhpav3 @ReformedBroker tells us to expect a boring year when all is done with lots of jolts inbetween $$ $SPY Apr 01, 2014
  • Flows Don’t Follow Value, They Follow Performance http://t.co/lwe3zP0zIX @reformedbroker tells u small investors r always late & lose $$ Apr 01, 2014  

High Frequency Trading (Boo!)

  • Michael Lewis Feels No Shame as Book Curdles Tempers http://t.co/qIbX9ztO2r Must admit, I lost respect 4 him on this last media circus $$ Apr 05, 2014
  • High-Frequency Trading May Be Too Efficient http://t.co/3yLdqjijcA @matt_levine explains the effect of HFT, who gets hurt, who doesn’t $$ Apr 03, 2014
  • High-Frequency Traders Chase Currencies as Stock Volume Recedes http://t.co/YSHRec5emx Ponder how HFT can b good 1 place & bad in others $$ Apr 03, 2014
  • What Michael Lewis Gets Wrong About High-Frequency Trading http://t.co/1kf3Uh9fDH He gets quite a bit wrong; this is a good summary $$ Apr 03, 2014
  • An Adaptation From ‘Flash Boys: A Wall Street Revolt,’ by Michael Lewis http://t.co/8TB1fkkzbt Tells story creating a fair stock exchange $$ Apr 01, 2014  

Marvel Comics Movies

  • Kevin Feige, Marvel’s Superhero at Running Movie Franchises http://t.co/R5wWdhlAUX Great article. Explains the strategic aspects well $$ Apr 05, 2014
  • Comic Wars: How Two Tycoons Battled Over the Marvel Comics Empire–And Both Lost http://t.co/NuRuteq8f1 Provides backstory for Marvel $$ Apr 05, 2014  

Companies & Industries

  • Energy Future Talks Pit Billionaires Against Billionaires http://t.co/Foaq3v50rf & the IRS, who is owed billions, creditors want 2 stiff $$ Apr 03, 2014
  • Old Math Casts Doubt on Accuracy of Oil Reserve Estimates http://t.co/wM1FQHAKvz Life of fracked wells is a lot shorter than conventional $$ Apr 03, 2014
  • New $GOOG Shares Hit Market as Founders Cement Grip With Split http://t.co/FdYqQCPFPR Won’t hurt much, just don’t issue2many C shs $$ $GOOGL Apr 03, 2014
  • The Argument for $75 Oil Should Be $95 Oil http://t.co/2EZdu90Scv W/weak global econ, oil should b falling but it is not; new equilibrium $$ Apr 01, 2014  

Other

  • Loans Are Finally Easier to Get http://t.co/JaVFE1LBLG If this persists for 6 months, start watching consumer price inflation $$ Apr 03, 2014
  • Jules Kroll’s KBRA Out to Disrupt Cozy Ratings Agency Business http://t.co/xGOiU3Tg7V Starts in area of greatest failure: securitizations $$ Apr 03, 2014
  • So U Think You’re Smarter Than A CIA Agent http://t.co/OLWUPMnQi9 Good Judgment project finds bright ppl who predict better than experts $$ Apr 03, 2014
  • Do We Hate Female Bosses? http://t.co/0oR9PBiSLe Never had one, so I don’t know. ;) $$ Apr 03, 2014
  • How Americans Meet Their Spouses http://t.co/f5L9GZ6i8K Fewer people meet their spouses @ work, more meet them over the internet than b4 $$ Apr 01, 2014
  • US Airports Are Off the Chart http://t.co/s1dO4kOeOR @Ritholtz shows how lack of infrastructural investment hurts the US $$ $SPY $TLT Apr 01, 2014
  • Millennials Mired in Wealth Gap as Older Americans Gain http://t.co/OfXlbWIV0l If u had lots of debts & few assets going into 2008, ouch $$ Apr 01, 2014  

Wrong

  • 2hard: US Seeks Changes to ‘Skewed’ Data in UN Climate Draft http://t.co/udApXg8XFq Models r 2complex 2produce any sort of accuracy $$ $SPY Apr 05, 2014
  • Wrong: Investment strategies you’d be foolish to ignore – Pros http://t.co/CTaNMR01Sb Many of these might work in the short-run, not L-T $$ Apr 03, 2014
  • Wrong: Schwab: HFT a cancer that needs to be stopped http://t.co/iVh9eatou2 It’s more complex than that; improves mkts in some ways $$ $SPY Apr 03, 2014
  • Wrong: Christine Lagarde: global economic growth is still too slow http://t.co/doefcWDiLN Aside frm degegulation govts can’t affct growth $$ Apr 03, 2014
  • Wrong: This Ratio Reveals The Market’s Top Bargains http://t.co/Hs9A55z9To Makes rookie error of applying FCF 2 financials, can’t b done $$ Apr 03, 2014
  • Wrong: The Modern View of the Stock Market http://t.co/OnhWdKgPrj Value of MPT is that it sidelines smart people who would b competitors $$ Apr 01, 2014
  • Meh: Flight 370 Search Gains Vessel With Black Box-Detector http://t.co/5PhcNkIEhL Late 2 arrive; can’t probe more than 1 mile deep $$ $BA Apr 01, 2014
  • Maybe: Home Sales in US Poised to Surge With Spring http://t.co/Pi2oE4es0n Maybe if prices come down this might happen, few moveup buyers $$ Apr 01, 2014
  • Very Wrong: When You Really Look, Financial Quicksand Turns Into Oligarchical BS http://t.co/LhiEZNxtas Claims Govt debt doesn’t matter $$ Apr 01, 2014  

Comments, Replies, and Retweets

  • @charlie_simpson Marry young, have children, a recipe for happiness that fights loneliness — true for men as well. Apr 02, 2014
  • @insidermonkey @jimcramer @katsuyama Stupid argument. Read & learn http://t.co/AtOpRCaRrN $$ Apr 02, 2014
  • . @dpinsen seems he just wants it 2 stop. Also notes Darfur attacked once again http://t.co/HRQ1xRLNYc & http://t.co/dDE995HFi0 $$ $SPY $TLT Apr 01, 2014
  • @dpinsen I’m not backing the Ukraine in NATO — only caution. NATO should be bold or silent, but not in-between, counting the costs. $$ Mar 30, 2014

Best of the Aleph Blog, Part 24

Friday, April 4th, 2014

These articles appeared between November 2012 and January 2013:

On Time Horizons

Investment advice without a time horizon is not investment advice.

This Election Will Solve Nothing

So far that is true of the 2012 elections.

NOTA Bene

We need to add “None of the Above” as an electoral choice in all elections.

Eliminating the Rating Agencies, Part 2

Eliminating the Rating Agencies, Part 3

Where I propose a great idea, and then realize that I am wrong.

The Rules, Part XXXV

Stability only comes to markets in a self-reinforcing mode, from buy and hold (and sell and sit on cash) investors who act at the turning points.

The Rules, Part XXXVI

It almost never makes sense to play for the last 5% of something; it costs too much. Getting 90-95% is relatively easy; grasping for the last 5-10% usually results in losing some of the 90-95%.

Charlie Brown the Retail Investor

Where Lucy represents Wall Street, the football is returns, and Charlie Brown is the Retail Investor. Aaauuuggh!

On Hucksters

Why to be careful when promised results seem too good, and they get delayed, or worse.

Bombing Baby BDC Bonds

Avoid bonds with few protective covenants, unless the borrower is very strong.

On Math Education

Why current efforts to change Math Education will fail.  Pedagogy peaked in the ’50s, and has been declining since then.

On Human Fertility, Part 2

On the continuing decline in human fertility across the globe.

If you Want to be Well-off in Life

Simple advice on how to be better off.  Warning: it requires discipline.

Young People Should Favor Low Discount Rates

If we had assumed lower discount rates in the past, we wouldn’t have the problems we do now.  (And maybe DB pensions would have died sooner.)

Problems in Life Insurance

On why we should be concerned about life insurance accounting.

Investing In P&C Insurers

On why analyzing P&C insurers boils down to analyzing management teams.

Selling Options Cheaply (Did You Know?)

Naive bond investors often take on risks that they did not anticipate.

Book Review: The Snowball, Part One

Book Review: The Snowball, Part Two

Book Review: The Snowball, Part Three

Book Review: The Snowball, Part Four

Book Review: The Snowball, Epilogue

My review of the most comprehensive book on the life of Warren Buffett.

On Watchlists

How I met one of the Superinvestors of Graham-and -Doddsville, and how I generate investment ideas.

Why do Value Investors Like to Index?

How I admitted to not having  a correct perspective on value indexing.

Evaluating Regulated Financials

Why regulated financials are different from other stocks, and how to analyze them.

Locking in a Smaller Loss

Why people are willing to lock in a loss against inflation, because of bad monetary policy.

Why I Sold the Long End

Great timing.

The Evaluation of Common Stocks

Value investing is still powerful, but the competition is a lot tougher.

The Order of Battle in Financial Planning for Ordinary Folks

The basics of personal finance

Sorting Through the News

How to use my free news screener to cut through the news flow, and eliminate noise.

On Financial Blogging

So why do we spend the time at this?

Matching Assets and Liabilities Personally

How to manage investments to fit your own need for cash in the future.

Penny Wise, Pound Foolish

How short-sighted, incompetent managers destroy value.

Expensive High Yield – II

No such thing as a bad trade , only an early trade… high yield prices moved higher from here.

2012 Financial Report of the US Government

Chronicling the financial promises made by the Federal Government

On Insurance Investing, Part 1

On Insurance Investing, Part 2

On Insurance Investing, Part 3

The first three parts of my 7-part series on how to understand this complex group of sub-industries.

How to Become Super-Rich?

Even Buffett didn’t get super-rich by only investing his own money.  He had to invest the money of others as well.  The super-rich form corporations and grow them; they build institutions bigger than themselves.

The Product that Never saw the Light of Day

On the Variable Annuity product that would simply be a tax scam.  Later I would learn that product exists now, just not in the form I proposed 8 years earlier when it didn’t exist.

Best of the Aleph Blog, Part 23

Thursday, April 3rd, 2014

Before I start this evening, I would like to explain some of the reasons for these “Best of the Aleph Blog” articles.  I write these no closer than one year after an article was written, so that I can have a more dispassionate assessment of how good they were.  I write these for the following reasons:

  • Some people want a quick introduction to the way I think.
  • Some publishers on the web want additional copy, and I let them republish some of my best pieces.
  • One day I may bundle a bunch of them together, rewrite them to improve clarity, and integrate them to create a set of books on different topics.
  • One of my editors at RealMoney once shared with me that I was one of the few authors there whose articles got re-read, or read after a significant time had passed.  This is meant to be mostly “timeless” stuff.
  • New readers might be interested in older stuff.
  • I enjoy re-reading my older pieces, and sometimes it stimulates updates, and new ideas.

Anyway, onto this issue of the “Best of the Aleph Blog.”  These articles appeared between August 2012 and October 2012:

On Credit Scores

Why credit scores are important; make sure you guard yours.

Retail Investors and the Stock Market

On the pathologies of being an amateur investor when there are those who will take advantage of you, and you might sabotage yourself as well.

On the Poway School District

Goes through the details of how a school district outside San Diego mortgaged the future of the next generation who will live there, if any will live there.

Using Investment Advice, Part I

Using Investment Advice, Part II

Using Investment Advice, Part III

Using Investment Advice, Part IV

A series of articles inspired by what I wrote at RealMoney, encouraging people to be careful about listening to advice in the media on stocks, including those recommended by Cramer.

The Future Belongs to Those with Patience

On why patience and discipline are required for good investing.

What Caused the Crisis?

A retrospective, if somewhat controversial.

On the International Business Machines Industrial Average

Replace the DJIA with a new cap-weighted index of the 30 largest capitalization stocks.

How Warren Buffett is Different from Most Investors, Part 1

How Warren Buffett is Different from Most Investors, Part 2

You have to understand Buffett the businessman to understand Buffett the investor.

Volatility Analogy

How an interview I messed up led to an interesting way to explain volatility.

Spot the Gerrymander

Eventually we need to eliminate gerrymandering — hey, maybe we can do that at the future Constitutional Convention.

Reforming Public School Testing

Creating exams where you can’t study for the test; you can only study.

Carrying Capacity

Governments imagine that they can shape outcomes, and in the short-run, they can.  In the long-run, the real productivity of the economy matters, and only those that can make it without government help will make it.  Whatever government policy may try to achieve, eventually the economy reverts to what would happen naturally without incentives.  There is a natural carrying capacity for most activities, and efforts to change that usually fail.

Actuaries Versus Quants

On why Actuaries are much better than Quants

Neoclassical vs Austrian Economics

Applying math to economics has been a loser.  Who has a consistently good macroeconomic model?  No one that I know.  Estimates of future GDP growth and inflation are regularly wrong, and no one calls turning points well.

The Dilemma of Adding Yield

A quick summary of risk in bonds, and why additional yield is often not rewarded.

The Dilemma of Adding Yield, Redux

On working out the pricing between discount, premium, and par bonds.

Too Much Investment

Investment is a good thing, overinvestment is a bad thing.

Got Cash? (Part 2)

On Buffett and others carrying cash to give themselves flexibility.

Set it and Forget it

On what uneducated investors should do.

Forest Fires and Central Banking

Short piece pointing out that small crises are needed to prevent huge crises.

Match Assets and Liabilities

Total Return Versus Long Liabilities

Cash flow matching has often been sneered at as an investment policy.  I explain why such a view is naive, not sophisticated, and definitely wrong.

The Rules, Part XXXIV

“Once something is used for hedging purposes, it becomes useless for predictive purposes.”

Why I LOVE Blogging

On the downsides of blogging, and why they aren’t so bad.

Higher Taxes, Inflation, Default (Choose One)

Coming to a country near you, and soon!

On the Virtue of Hard Questions for Young Analysts

How young analysts toughen up through hard competitions.

Dealing in Fractions of Sense

On how to reform High Frequency Trading

Yield is the Last Refuge of Scoundrels

Far from offering high price appreciation, it is far easier to cheat many people by offering a high yield, because average people look for ways to stretch their limited resources with a tight budget.

Sorted Weekly Tweets

Saturday, March 29th, 2014

Rest of the World

 

  • Malaysia Plane Traced in Inmarsat Engineer London Huddle http://t.co/roKtJSY9WY How they managed to figure out the area of the crash $$ $SPY Mar 30, 2014
  • UK Pension Revolution Putting Long-Term Bonds at Risk http://t.co/o8TNO4lgAn Need 2 match liabs drives demand 4 long bonds, lowers yields $$ Mar 30, 2014
  • Putin Has Exposed NATO’s Weakness http://t.co/xDs2X10AKg US & NATO Europe willing to agree upon? What r they willing 2 risk? Be careful $$ Mar 30, 2014
  • China Said to Expand Property Survey Amid Oversupply Concern http://t.co/m0VAkijXmi Will b difficult 2 end overinvestment by fiat $$ Mar 30, 2014
  • Chinese Pigs Eating Soybeans Cut US Supply to 1965 Low http://t.co/hLfrB2MXM1 Chinese demand 4 pork drives demand 4 US Soybeans $$ Mar 30, 2014
  • Lira Fate Tied to Real Assets as Hot Money Flees http://t.co/GpdoGuymdO In countries where inflation is a threat, invest in property $$ Mar 30, 2014
  • Business not ipso facto criminal: Tendency of presuming it guilty without proof is damaging India’s economy http://t.co/HgpdxdNrbu $$ Mar 30, 2014
  • Mr. Putin’s Revealing Speech http://t.co/BTQ2IDbny5 Defender of Orthodox civilization as he sees it pushes back against encroahing NATO $$ Mar 30, 2014
  • Russian Forces on Border Stir Concern as Crimea Annexed http://t.co/b7SLK8wTTH Threats of more economic sanctions will not deter Putin $$ Mar 23, 2014
  • What the West Can Learn From Putin’s Other Neighbors http://t.co/NB4aeGih9D Don’t make promises that u won’t keep; Putin is not scared $$ Mar 22, 2014

 

Financial Sector

 

  • So what is today’s nonbank business model? http://t.co/awllKHMHK1 Legalized extortion done to “protect consumers,” objective is political $$ Mar 30, 2014
  • Wall Street Banks Cut Out of Prized Commercial Mortgages http://t.co/xImkJXAwC7 $MET $PRU originate commercial mortgages 2 fund own liabs $$ Mar 30, 2014
  • SEC Is Probing Dealings by Banks and Companies in Loan Securities http://t.co/yseFiyZvFJ Current CLO issuance drives loan issuance $$ $BKLN Mar 30, 2014
  • Pimco Chases BlackRock in ETFs as Money Returns to Bonds http://t.co/rL9Bm40rHm Amazing how people follow anything w/positive momentum $$ Mar 30, 2014
  • And if banks start lending aggressively, it will b time to radically shrink asset maturities in bond portfolios, velocity will b rising $$ Mar 30, 2014
  • Banks Lending Like It’s 2007 Belied by $10T Hoard http://t.co/Ef6yHiVNSu But they aren’t lending heavy yet, if they do FOMC has 2tighten $$ Mar 30, 2014
  • Scandal-Hit British Banks Turn to ‘Weirdy Beardy’ http://t.co/XGv1Bt9af1 ”Why do you exist?” “Who r u?” Pondering existence bugs bankers $$ Mar 30, 2014
  • Josh Rosner: The Wrong Remedy for Fannie and Freddie http://t.co/ExIuZxRlyM Better to wind them up & get Govt out of the Mtge mkts $$ Mar 30, 2014
  • Iowa’s Friendlier Watchdogs Lead Insurer Pack to Des Moines http://t.co/UPug7MJA7I Iowa DOI will regret embracing complexity, gtee funds2 $$ Mar 30, 2014

 

Market Impact

 

  • Which will win? $BRK.B or $IWM ? 3views: http://t.co/P4rWOG283S & http://t.co/c20Fbqh2b6 & http://t.co/QMIWqojPnB BRK will beat smallcaps $$ Mar 30, 2014
  • Americans Can’t Retire When Bill Gross Sees Repression http://t.co/4hNi5jAH2U Investments eventually reflect the underlying cash flows $$ Mar 30, 2014
  • Financial scars linger: 1/3 of investors wary of stocks http://t.co/xbFcGeOykX Have 2 wait 4 these people 2 come & put in the top $$ $SPY Mar 30, 2014
  • 1999 Buffett: stocks can’t possibly meet public’s expectations. Internet? Notes how few got rich in auto &aviation http://t.co/2FsC9vuvKe $$ Mar 30, 2014
  • Declining Pension Benefits Leave Workers Uneasy http://t.co/A5RmBueODe Difficult 2 fund high benefits when interest rates r so low $$ $TLT Mar 30, 2014
  • Google Traders See Opportunity in Confusion on New Shares http://t.co/2bTfXy75ol New nonvoting shares may allow 4 some arbitrage plays $$ Mar 30, 2014
  • Attention Suckers: Please Send Us Your Money http://t.co/Mibp1EXWh3 @Ritholtz comments how the JOBS Act weakened investor protections $$ Mar 30, 2014

 

US Housing

 

  • High Prices Partly to Blame for Slow New Home Sales http://t.co/rSHWH4Uzra When markets near their peak, frequently volumes drop off $$ $LEN Mar 30, 2014
  • Time might be ripe for boomers to sell their homes and move on http://t.co/hzL9mMImDS Sell them 2whom & @ what price? Lack move-up buyers $$ Mar 30, 2014
  • Finding a House That Won’t Destroy You http://t.co/kJNQf3upos Buy a house u can afford even under stressed conditions, reduce risk $$ Mar 30, 2014

 

US Politics, Policy & Economics

 

  • Florida’s Scott Travels on Corporate Tab as Lobbyists Tag Along http://t.co/qhDVzIgXO1 Governors increasingly use corporate $$ 2fund trips Mar 30, 2014
  • IRS Takes a Position on Bitcoin: It’s Property http://t.co/aCbGKvWGRT Thus any trading of bitcoins involves capital gains &losses $$ $BTCUSD Mar 30, 2014
  • Google, EBay and the Roots of Collusion http://t.co/Vc2SMUU5T5 Some don’t want to annoy companies that r complementary 2their biz goals $$ Mar 30, 2014
  • The Individual Mandate Goes Poof http://t.co/PvjexmswaF Barack Obama undoes what House GOP would like 2undo, just not permanently totally $$ Mar 30, 2014
  • Global Warming Will Not Cost the Earth, Leaked IPCC Report Admits http://t.co/hziljg2Npp Will b interesting 2c how gets spun by bothsides $$ Mar 30, 2014
  • Economists: Rising interest rates are the biggest threat to recovery http://t.co/gPQ1c2ZHAQ More evidence that rates will stay low $TLT $$ Mar 24, 2014
  • Kocherlakota: Don’t raise rates to head off possible crisis http://t.co/yxAGSWGmGQ There may come a time when you will have no choice $$ Mar 22, 2014

Other

 

  • Advice for a Happy Life by Charles Murray http://t.co/7y51RDeGy3 Marry young & someone similar 2u, don’t try2get rich, Groundhog Day $$ $SPY Mar 30, 2014
  • Why Runners Can’t Eat Whatever They Want http://t.co/FLMOWE8sC1 Studies Show Heart Risks to Devil-May-Care Diets—No Matter How Much U Run $$ Mar 30, 2014
  • Speed Reading Returns http://t.co/EwxEFe6Paz Apps and Classes Help People Adapt 2Reading on Their Phones | More content 2 read everywhere $$ Mar 30, 2014
  • The book Scientology tried to ban http://t.co/g4GeTda7bS Read about the *real* L. Ron Hubbard, from a book Church of Scientology hates $$ Mar 30, 2014

 

Wrong

  • Wrong: Not Voting Should Not Be a Choice http://t.co/UlBFwMe6fi Seems fundamental that no one should b forced to vote; it’s a protest $$ Mar 30, 2014
  • Wrong: Japan Is Doomed Unless It Learns to Love Inflation http://t.co/AFD8QA1d8Z More “hair of the dog that bit you solutions” $$ $JPY $JOF Mar 30, 2014
  • Wrong: Digital v human: the new debate http://t.co/PiUgvNHm6x We’ve seen transformational technologies b4, takes a while 4 new jobs 2show $$ Mar 30, 2014
  • Wrong: Fed’s Bullard: Yellen’s ‘6 Months’ Comment Doesn’t Represent Change in Policy Stance http://t.co/v7gzHBobVw Could have fooled me $$ Mar 22, 2014

 

Notes, Comments, Reples & Retweets

  • RT @ReformedBroker: In November 1999, Buffett wrote this op-ed for Fortune on why he doesn’t bet on innovation. @pmarca @hblodget http://t… Mar 27, 2014
  • RT @felixsalmon: “This means Bitcoins are not fungible, and that makes it unworkable as a currency.” http://t.co/JjFOO8Z2Xq cc @pmarca @bar… Mar 27, 2014
  • RT @journalistjosh: Crowdfunding emptor: Attention Suckers: Please Send Us Your Money http://t.co/gvxeT4SyOW via @BloombergView Mar 27, 2014
  • We enjoyed having @susanweiner speak to us at the #CFA Institute – Baltimore; we can all benefit from learning to write more engagingly $$ Mar 26, 2014
  • ‘ @PlanMaestro Yes, I remember that piece http://t.co/YDhQTnNopk and the series that followed it http://t.co/OC2PfnWc1z $$ Capital efficient Mar 26, 2014

 

Classic: Know Your Debt Crises: This Too Shall Pass

Thursday, March 27th, 2014

The following was published at RealMoney on August 6th, 2007:

Editor’s Summary

The illiquid debt instruments at the heart of the current crisis are subject to regime shifts.

  •  We’re in a periodic repricing of illiquid debt instruments.
  • Look for the time when the bulk of the losses will be reconciled.
  • Stick with the companies that have strong balance sheets.

I appreciated Cramer’s piece Friday morning, which picks up on many themes that I have articulated for the last four years here on RealMoney.  Here are a few:

  • Hedge fund-of-funds demand smooth returns that are higher than that which a moderate quality short-term fixed-income fund can deliver.
  • This leads to the creation of hedge funds that seek yield through arbitrage strategies.
  • And the creation of hedge funds that seek yield through buying risky debts, unlevered.
  • And the creation of hedge funds that seek yield through buying less risky debts, levered.
  • And the creation of hedge funds that seek yield through buying risky debts, levered.

In the short run, yield-seeking strategies work.  If a lot of players pursue them, they work extra-well for a time, as late entrants to the trade push up the returns for early entrants, with greater demand for scarce, illiquid securities with extra yield.  Pricing grids are a necessity for such securities, because the individual securities don’t have liquid secondary markets.  The pressure of demand raises the value not only of the securities being bought, but also of those securities that are like them.  (Smart managers begin to exit then.)

I’ve been through regime shifts in the markets for collateralized debt obligations (CDOs), asset-backed securities (ABS), residential-backed securities (RMBS) and commercial mortgage-backed securities (CMBS).  Something shifts at the back of the chain that forces everything to reprice.  For example:

1989-1994: After the real estate boom of the mid-1980s, many banks, savings & loans and insurance companies get loose in their lending standards and real estate investment, leading to a crisis when rent growth can’t keep up with financing terms; defaults ensue, killing off a great number of S&Ls, some major insurance companies and a passel of medium and small banks.

Late 1991-early 1993: The adjustable-rate mortgage market, fueled by demand from ARM funds, overbids for ARMs in an effort to provide a high floating rate yield.  As the FOMC loosens monetary policy, higher than expected prepayments force losses onto the ARM funds

Late 1993-late 1994: The FOMC threatens to, and does, start raising interest rates, which throws the residential mortgage-backed market into crisis.

Mid-1998-mid-1999: Long Term Capital Management blows up, forcing all manner of exotic ABS, CMBS and RMBS into the market for bids.  The bids back up, until the entire market reprices and then tightens in the space of one year.

1998-1999: Home equity ABS blow up, as defaults threaten to, and then do, emerge at levels far higher than anticipated.  Almost no originators survive.

1999-2001: Cruddy high-yield bonds reveal their true value as defaults threaten to, and then do, emerge.

2002-2003: The manufactured-housing ABS market blows up, as originators don’t take initial losses but roll borrowers over into new loans that reduce payments and extend payment terms, technically keeping the loans current.  The system collapses when the buildup of bad debts and repossessed homes becomes too great to roll over.

(Of the existing large securitization markets, only the CMBS market so far has not faced a real crisis, partly due to the influence of the B-piece buyers cartel: six or so firms that buy the junk-rated debt of deals and enforce credit quality standards on the individual loans by kicking out poorly underwritten loans.  But who knows?  Even that could be overwhelmed under the right circumstances.)

In each of these situations, there was a boom-bust cycle.  The markets did not adjust slowly and evenly to changing conditions; the transitions between “boom” pricing, and “bust” pricing were swift.  This is the nature of markets, particularly when enough debt is employed to amplify the process.

There is no conspiracy necessary to make the shift happen (though often the media will make it seem like there was one); the bubble pops when the financing proves insufficient to carry the assets.  After the bubble pops, it becomes a question of what the underlying assets can be liquidated for, allocating losses mercilessly according to the loan documents and bankruptcy priority.

Today the crises are nonprime lending, leveraged buyouts and other high-yield debt and over-leverage in the CDO market.  These will get worked out, as all other crises do, handing losses to those who speculated unwisely and allowing those who financed properly to prosper on the other side of the crisis.

As you invest, look for the time when more than half of the losses will be reconciled.  That will be near the bottom for homebuilders and housing finance.

That time may not come for another two years or so, but there will be money to be made once the crisis is mostly reconciled.  Just stick with the companies that have strong balance sheets.

Sorted Weekly Tweets

Saturday, March 22nd, 2014

Federal Reserve

 

  • Why Central Banks Should Be Vague http://t.co/iVO9s9l3il They would b better off saying nothing, as their ability 2analyze future is poor $$ Mar 21, 2014
  • Yellen and the Curse of Forward Guidance @BloombergView http://t.co/kAWJg4vrEN Better the Fed should shut up & let the market adjust $$ $TLT Mar 21, 2014
  • Yellen and the Fed Go Dark http://t.co/M70bG02KZ3 @M_C_Klein tells the truth, better the FOMC should say nothing, words don’t mean much $$ Mar 21, 2014
  • Yellen Punt Prompts Panic http://t.co/ztlpEuEGp6 Interesting to be quoted in the article above. Author liked my comment on the weather $$ Mar 20, 2014
  • Essentially Yellen said monetary policy will b the same as before, only more so. But the forecasts show a faster removal of accommodation $$ Mar 19, 2014
  • Level of Central tendency of FOMC Fed Funds forecasts 2014-6, LR — 0.30%, 1.13%, 2.42%, 3.88% Change -0.04%, 0.07%, 0.25%, -0.01% $$ Mar 19, 2014
  • Level of Central tendency of forecasts for when the Fed first starts tightening Fed funds: October 2015, change from prior January 2016 $$ Mar 19, 2014
  • Level of Central tendency of FOMC PCE Inflation forecasts 2014-6, LR — 1.55%, 1.80%, 1.84%, 2.00% Change 0.04%, 0.03%, -0.03%, 0.00% $$ Mar 19, 2014
  • Level of Central tendency of FOMC Unemp forecasts 2014-6, LR — 6.21%, 5.73%, 5.41%, 5.45% Change -0.24%, -0.20%, -0.13%, -0.08% $$ Mar 19, 2014
  • Level of Central tendency of FOMC GDP forecasts 2014-6, LR — 2.81%, 3.04%, 2.76%, 2.21% Change -0.13%, -0.09%, -0.08%, -0.05% $$ Mar 19, 2014
  • Low-Wage Workers Are Finding Poverty Harder to Escape http://t.co/RQP18XOPQA Low Marketable Skills plus divorce or no marriage w/kids $$ Mar 18, 2014
  • Fed set to roll out new low-rate pledge http://t.co/WXYH7aiBcK Fed spends 2much time on words, not enough on long-term efficacy of policy $$ Mar 18, 2014
  • Yellen should take away the punch bowl http://t.co/VzkzJZr83D Fed will never do that; doesn’t like 2 take actions that point back @ them $$ Mar 18, 2014

 

Rest of the World

 

  • Bloomberg Hints at Curb on Articles About China http://t.co/q1R6Xsa8fF Bloomberg makes its $$ by renting out terminals; wants more China biz Mar 21, 2014
  • CPI Credibility Lasts 34 Days as Doubts Return http://t.co/qtUNozXPnZ Well, that was quick – guess Argentina doesn’t want 2 pay more out $$ Mar 20, 2014
  • Putin’s Tools of Sabotage Beat Urgency of Ukraine Invasion http://t.co/Yv3rRkrdnd Putin ready 2 play a rougher game, understands politics $$ Mar 20, 2014
  • Putin Is No Madman to Russians as Power Play Trumps Economy http://t.co/hOPPmnCF5u We shouldn’t fight over this, Crimea is Russian $$ $RSX Mar 19, 2014
  • “Nobody Knows Anything” http://t.co/WTlzkgXvkM Knowledge lost as Cold War Generation gone from foreign policy: C: http://t.co/0KvkZIqlHW $$ Mar 18, 2014
  • How China’s official bank card is used to smuggle money http://t.co/2PIMdctQu5 Between Macau Casinos & UnionPay, wealthy get $$ out of China Mar 18, 2014
  • China to Spend More Than $162B on Shantytowns http://t.co/l0HKesS6lr Herding people into cities, but what will they do for work? $$ $FXI Mar 18, 2014
  • Alibaba Confirms It Will Begin IPO Process in US http://t.co/jkdScz12kQ Could be valuable 4 $YHOO who owns ~24% $$ Mar 18, 2014
  • The Welsh dairy farmers who bought 320 buy-to-let properties in Sweden http://t.co/haGuwFQXGn Worry when it seems easy 2 make $$ in housing Mar 18, 2014
  • Chinese Companies Caught in Yuan Riptide http://t.co/BnKss6ZQvN What was once viewed as “free money” proves to have a cost, panic ensues $$ Mar 18, 2014
  • Musk Jab at Rival Shows US Space Reliance on Russia http://t.co/NBun2inY5Q Interesting how we rely on Russia 4 manned space flight $$ Mar 18, 2014
  • Nigeria Overtaking South Africa Masks Poverty Trap http://t.co/Bf2ZGIXuHl When economy is mostly resource extraction inequality common $$ Mar 18, 2014
  • Putin’s Motives Rooted in History Remain a Mystery Abroad http://t.co/ckRcNaYgUj Should b happy that most of Ukraine is allied w/West $$ Mar 18, 2014
  • Chinese Developer Bonds Sink in Secondary Trade Amid Collapse http://t.co/LDVrHVdptU Test 4 Govt: how much bad credit will u bail out? $$ Mar 18, 2014
  • Japan Analysts Split on Fiscal Crisis Time as Tax Looms http://t.co/9VQPhtQaoD Testing the limits of how much a govt can borrow b4 crisis $$ Mar 18, 2014

New Businesses

 

  • Rock-Climbing Generation at Foot of US Startup Ascent http://t.co/dQjCDlYNVL Example of an unusual business catering to exercise wants $$ Mar 21, 2014
  • Zuckerberg, Musk Invest in Vicarious http://t.co/C5avwXQ0mi Part of brain that sees, controls the body, understands language & does math $$ Mar 21, 2014
  • Personally, I think Artificial Intelligence won’t succeed w/ that. No surprise that Vicarious is trying, though — would save lotsa time $$ Mar 21, 2014

 

Finance

 

  • Credit Card Data Security Standards Don’t Guarantee Security http://t.co/Kky2011rLb Antiquated technology relatively ez2hack, no surprise $$ Mar 21, 2014
  • Why Do High Frequency Traders Never Lose Money? http://t.co/V3CdYpzVZx Why do auctioneers & brokers rarely lose money facilitating trades $$ Mar 21, 2014
  • How to Decide on Your Investment in Bonds http://t.co/9ApVxQkxyG When rates are so low you should b extra careful, stay short & hi qual $$ Mar 21, 2014
  • Shadow Banking Deals Prompt SEC Plan to Cap Broker Leverage http://t.co/6CKxLVDYT5 SEC does not go far enough, repo mkts should b ended $$ Mar 21, 2014
  • SEC to take another look at ETF regulation http://t.co/pKPQeUvVqU Should leveraged products & inverse products b allowed? Lousy returns $$ Mar 20, 2014
  • Junk Bonds at $2T as Gundlach Pulls Back http://t.co/CMRM6cLF6E Markets always seem large when they are overvalued, Gundlach is right $$ Mar 20, 2014
  • Seth Klarman warns of impending asset price bubble http://t.co/oa49IEj68A When he runs out of safe places 2 put $$ the red lights flash Mar 18, 2014
  • ARM Loans—a Vestige of the Housing Bubble—Are Making a Comeback http://t.co/BrrfQlDwni True 4 wealthy & those with prime credit scores $$ Mar 18, 2014
  • Buffett gets the better of everyone, version 4,762 http://t.co/uCq0dE1Uo8 Parts w/his holdings of $GHC, retires shares of $BRK.A & $BRK.B $$ Mar 15, 2014

 

Politics & Policy

 

  • Uneven Wage Gains Restrain Recovery http://t.co/LD5h31WFxO Article has a lot of interesting data on what jobs r available to semi-skilled $$ Mar 21, 2014
  • Obama Keystone Choice Pits Donors Against At-Risk Senate http://t.co/jCNbOFTg0w Kind of a no-win situation 4 Obama; should ok the deal $$ Mar 20, 2014
  • Young Invincibles Are Killing Obamacare http://t.co/AcNg9p83d7 Obamacare destroys the healthcare system as healthy young people leave $$ Mar 20, 2014
  • Christie Counts on Revenue Surge Not Seen in Most States http://t.co/dfOkM7gy8V A Reaganesqe flaw: relying on the rosy scenario w/Dems $$ Mar 20, 2014

 

Companies & Industries

 

  • Phillips 66 Considering Splitter at Sweeny Refinery http://t.co/9g7NefuiTJ New trend: Partial refining. Those products can b exported $$ Mar 21, 2014
  • TV Subscriptions Fall for First Time as Viewers Cut the Cord http://t.co/M984bGpJfr It is cheaper to not have a cable subscription $$ $SPY Mar 21, 2014
  • A Sour Bean Sweetens Cocoa Supply http://t.co/AsUOr8cBlM Fascinating story of a high-yield bean that is more sour than low-yield beans $$ Mar 21, 2014
  • Buffett Cuts Tax Bill, Tells Others Not 2 Complain http://t.co/bbjxWcyy8i If Buffett weren’t so sanctimonious on taxes this would b small $$ Mar 20, 2014
  • IBM’s Watson to help in brain cancer research http://t.co/EozXiEIXq8 Fascinating 2c Watson sequencing DNA of cancer & suggest treatments $$ Mar 20, 2014
  • TED Winner Launches Campaign to Unmask Shell Companies http://t.co/g7FXj6ca2I Ambitious effort 2unmask those using shells 4 bad purposes $$ Mar 20, 2014
  • Windows XP: What to Do When Microsoft Ends Its Support http://t.co/MSKGTC0ofU Article agrees w/my answer; get a copy of Windows 7 $$ $MSFT Mar 20, 2014
  • Fannie Mae Wind-Down Deemed Threat to Home Recovery http://t.co/L8Bg5wd7bz It will be painful, but we need to delever housing $$ Mar 19, 2014

 

Other

 

  • IFRS could be stripped of accountancy watchdog role http://t.co/zxcHHBaUcW This would be very good. US GAAP is far superior to IFRS $$ $SPY Mar 19, 2014
  • Bugatti-Driving 26-Year-Old Tied to Penny-Stock Website http://t.co/p9J5FOb6kx Of John Babikian & the misnamed AwesomePennyStocks $$ $SPY Mar 18, 2014
  • Behind The Scenes With Dream Team, CytRx & Galena http://t.co/xFC3DgsVT9 He gets inside firm paid/undisclosed promotions 4 $CYTR & $GALE $$ Mar 18, 2014
  • Individual investors Lose Money When Using Technical Analysis http://t.co/dVLgjWUOk8 I can hear it now, “But they’re doing TA wrong!” $$ Mar 18, 2014
  • The Hidden Rot in the Jobs Numbers http://t.co/R0FHIrKaVt Here’s another way 2c it: http://t.co/KtoClJngXF $$ $TLT $MACRO Mar 18, 2014
  • Want Success? Choose the Right Parents http://t.co/AverC5lySd Not sure I believe it, but interesting thesis $$ Mar 18, 2014
  • Pssst! Everything’s a Conspiracy http://t.co/cFUH0dK9eo Tough 2hold a significant conspiracy together, high incentives 2eventually reveal $$ Mar 18, 2014
  • To Make an Airplane Disappear, Start by Getting Through the Cockpit Door http://t.co/AVcMjSG1LY How difficult it would b2 take over a 777 $$ Mar 18, 2014

 

Wrong

 

  • Late: City vs. Country: How Where We Live Deepens the Nation’s Political Divide http://t.co/lDKNT0bOjx This isn’t news; no surprises here $$ Mar 21, 2014
  • Wrong: ‘Ring of Death’ Throttles Georgia as Small Banks Close http://t.co/g9VGMPkKx0 Lent 2 much on overvalued properties, their fault $$ Mar 20, 2014
  • Weak: Why gaining from value investing is hard http://t.co/hGY8Xnr6p7 Value investing typically does better on other side of mkt peaks $$ Mar 18, 2014
  • If We’re Going to Take Budget Forecasts Seriously, Then This is a Good Way To Present Them http://t.co/yk9asr52HT Kinda naive about stats $$ Mar 18, 2014
  • Wrong: Why equities sold off despite a dovish Fed http://t.co/pyUW8FebAB Fed was not dovish. Yellen’s comments & Fed forecasts bearish $$ Mar 21, 2014
  • Weak: Robert Shiller On The Tech Economy http://t.co/tvvo8uzgot Some innovations save labor; others create demand 4labor through new svcs $$ Mar 21, 2014

 

Replies, Retweets & Comments

 

  • The bigger change was the shift in the time tightening is likely to happen. That shifted up 3 months on… http://t.co/dIxt1tcxgB Mar 19, 2014
  • “Interesting to be quoted in the article above. If you want to see the other things I wrote about…” David_Merkel http://t.co/k0NyUsgTzG $$ Mar 20, 2014
  • RT @treehcapital: Credit investors like the elves in LOTR~when they leave Middle Earth, time to pay attention “Gundlach Pulls Back” http://… Mar 20, 2014
  • @treehcapital That’s a great analogy. I’ve lightened up as well, time to do more. Mar 20, 2014
  • We’ve been through periods like this before in human history. Inventions that save labor in an area… http://t.co/ajY9DJwns6 Mar 21, 2014

Disclaimer


David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.


Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions.


Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.

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